With hot weather over us and people in the United States eager to make up for the lost time from last year, it would be a shock if marijuana sales did anything other than increase. Canny cannabis investors are understandably eager to make money before the moment passes.
However, just buying shares in the fastest growing cannabis cultivators is not enough. Rapid growth and profitability are challenging to say the least, and most marijuana companies are struggling to achieve one thing or another. Let’s examine three cannabis stocks that are positioned to get hot this month – and in the foreseeable future as well.
1. Innovative industrial properties
Innovative industrial properties (NYSE: IIPR) is an evergreen cannabis stock because it has something that all other marijuana companies need: money. Cash-strapped medical marijuana cultivators can go to the IIP and sell their indoor greenhouse space to raise funds. Innovative then rents real estate back to the seller and gets a monthly rent check in the process. These “leaseback” transactions have made the company the real estate tycoon of the cannabis industry, and there is no sign that this status will soon decline.
IIP is a good stock for this summer for two reasons. First, it stands to gain growth in its industry, which may soon be accelerated if cannabis is legalized in the United States. But there is no need to jockey for the market share of marijuana products to remain profitable. If anything, the intensified competition will make its customers all the more desperate to enter into an agreement to get its cash infusions.
Secondly, the IIP’s income as a landlord is extremely uniform, so it can afford to pay a dividend that currently provides approx. 2.8%. As time goes on, there is a good chance that dividends will rise, so investors who buy the stock now will get an even bigger advantage.
2. Green Thumb Industries
Green Thumb Industries (OTC: GTBIF) is a traditional cannabis company that sells marijuana products directly to consumers. Importantly, its presence in some of the most vibrant markets for adult and medical cannabis use in the United States allowed it to increase its quarterly revenue by nearly 90% over the first quarter. It is also one of the few profitable public marijuana sellers, although the margin is still quite thin at 4.56%.
The company’s secret sauce is the careful penetration of its markets. On July 1, it completed the acquisition of a medical marijuana provider in Virginia, leaving Green Thumb with as much as 20% of the state’s licenses to grow cannabis. Because other operators are limited by the number of licenses available, they may not even be able to compete until 2024, when the state will begin allowing sales for recreational use. At that point, Green Thumb will be so established in the market that it may not even be fighting against new entrants.
In states like Massachusetts, where Green Thumb is already present to meet the needs of adult as well as medical marijuana customers, other new acquisitions are deepening its market penetration. In short, there are not many other cannabis companies that can simultaneously expand revenue and operational footprints so tightly while remaining profitable, and that is what makes Green Thumb so exciting for investors.
3. Trulieve Cannabis
As with Green Thumb, Trulieve Cannabis‘s (OTC: TCNNF) skill is to balance expansion into new regional medical marijuana markets while maintaining a strong bottom line. Building on its leading 48% share of the Florida market, Trulieve is currently working toward new regional centers to bolster future growth. But do not take it to mean that current growth is slow. Its profit margin is 11.22% and its quarterly revenue increased by over 101% year over year from the first quarter of 2021.
To ensure that it can continue to scale to meet the growing demand, the company is expanding its growing facilities in Pennsylvania and Massachusetts, thereby establishing a new production center in the Northeast. The new production capacity will be necessary as Trulieve’s operations in West Virginia per. July 7 has begun for the first time. And it just bought a new pharmacy in Massachusetts on June 30th. So investors can expect significant new revenue to be recorded from the next quarter.
If Trulieve’s regional strategy works as well in the Northeast as in Florida, its stock will continue to be a winner for shareholders.
This article represents the author’s opinion, that may disagree with the “official” recommendation position for a Motley Fool premium advisory service. We are motley! Questioning an investment dissertation – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier and richer.